Tech Costs to Spike as Russia-Ukraine War Withholds Vital Commodities

Shah Gilani|March 7, 2022

The Russia-Ukraine war has continued to escalate on all sides. As Russian forces continued bombing Ukrainian cities, Western Europe and the US have tightened all sanctions, for better or for worse.

This conflict has affected millions, through physical and economic upheaval – leading to a series of global trends that will affect us all.

Which is why, in addition to today’s Watchlist, I’ve decided to go live at 8:30 am EST to give you the most up-to-date information about the conflict and its consequences before opening bell. This way, you’ll have plenty of time to prepare for a week of trading.

If you haven’t already, you can sign up for my livestream by clicking here. Only registered readers will be able to attend the event.

Now, on to the Watchlist.

First up is Advanced Micro Devices Inc. (AMD), the Santa Clara, California-based computing and graphics semiconductor company.

As the war between Russia and Ukraine escalates, and energy and agricultural commodity prices soar, it could be easy to miss the other consequences (and potential profits) resulting from the conflict.

The Russian attack on Ukraine could disrupt global supply chains for neon gas and palladium, both of which are used in the manufacture of semiconductors.

Ukraine is the largest neon manufacturer in the world and supplies more than 90% of the US’s semiconductor-grade neon.

Additionally, Russia accounts for approximately 37% of the world’s palladium which is used in sensor chips and certain types of computing memory.

The higher cost of palladium and neon could send the price of semiconductors soaring, dampening demand. But with fewer semiconductors being made, AMD could charge a premium for their products.

At this point, let’s buy the AMD June 17, 2022 $120/$125 Call Spread for $1.90 or less. Plan on exiting the call spread a 100% profit or if shares of AMD close below $100.00.

Then there’s Costco Wholesale Corporation (COST).

On Thursday, the membership discount retailer reported its second-quarter results for fiscal 2022 that included revenue and earnings of $51.9 billion and $2.92 per share – that’s a year-over-year growth of 36.4% and 15.9%, respectively.

Comparable sales, excluding the impact of fuel and currency fluctuations, jumped 11.1% in the second quarter, compared with Refinitiv IBES estimates of an 8.74% rise.

That’s good, but I think those numbers are going to start to slow.

Inflation is already at a 40-year high in the US and, depending on the length and depth of Russia’s war, any further disruption could cause prices to rise at the pump and on store shelves.

Higher food and energy costs are already the two biggest concerns consumers have right now and I think it’s going to start to shop up in consumer spending habits.

Even though COST is a discount retailer, which should bode well for the company in an inflationary period, I think consumers are going to pullback from some of the higher-priced items for offer at their locations.If that happens, we could see lower than expected comp sales in the next quarter, and that could drive shares lower.

If shares of COST trade up to $540 by March 11, let’s buy the COST June 17, 2022 $470/$460 Put Spread for $3.00 or less. Plan on exiting the put spread for a 100% profit or if shares of COST close above $560.00.

As I said up top, that’s not all I’m watching this week. The news is constantly evolving, bringing the markets up or down or sideways. To know the best ways to handle yourself in the stock market right now, you need the most up-to-date information.

Which is why I’m going live at 8:30 am EST today. I will be streaming a real-time discussion of the markets, the war, and everything you need going into this week.

You can register for this event by clicking here.

I hope to see you there.

Cheers,

Shah